Youth Co-Op, Inc. (A Not-For-Profit Organization) Financial Statements And Independent Auditor s Report June 30, 2017

Transcription

1 Financial Statements And Independent Auditor s Report June 30, 2017

2 CONTENTS Page I. FINANCIAL SECTION Independent Auditor s Report 1-3 FINANCIAL STATEMENTS Statements of Financial Position 4 Statements of Activities 5 Statements of Functional Expenses 6 Statements of Cash Flows 7-8 Notes to Financial Statements 9-22 SUPPLEMENTAL INFORMATION Schedule of Expenditures of Federal Awards 23 Note to Schedule of Expenditures of Federal Awards 24 II. REPORTING SECTION Independent Auditor s Report on Internal Control over Financial Reporting and and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs 29

3 FINANCIAL SECTION

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5 To the Board of Directors of Youth Co-Op, Inc. Page 2 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to on page 1 present fairly, in all material respects, the financial position of Youth Co-Op, Inc. as June 30, 2017, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other matters Other information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying Schedule I (page 23), as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis. This schedule is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Report on Summarized Comparative Information Vizcaino Zomerfeld, LLP, which merged with Prager Metis CPAs, LLC on August 1, 2017, previously audited the Youth Co-Op, Inc financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated December 22, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2016, is consistent, in all material respects, with the audited financial statements from which it has been derived. 2

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7 FINANCIAL STATEMENTS

8 Statements of Financial Position (Unrestricted) June 30, 2017 (With comparative totals for 2016) ASSETS * Current assets Cash $ 1,765,726 $ 3,061,906 Accounts receivable - grants 4,169,794 3,342,790 Prepaid expenses 38, ,032 Total current assets 5,974,389 6,510,728 Investments (supplemental retirement plan) 237, ,556 Property and equipment 19,881,719 17,156,162 Other assets Bond discount 330, ,630 Reserves (Note D) 2,413,379 5,403,269 Security deposits 44,052 46,276 2,787,540 5,758,175 LIABILITIES AND NET ASSETS $ 28,881,640 $ 29,643,621 Current liabilities Accounts payable and accrued expenses $ 340,315 $ 107,732 Accrued payroll and vacation 679, ,779 Deferred revenue 2, ,572 Other liabilities 6,842 6,842 Current portion of long-term debt (Note D) 170, ,000 Total current liabilities 1,198,762 1,207,925 Accrued employee benefits (supplemental retirement plan) 237, ,556 Long-term debt, less current portion above (Note D) 19,200,584 19,366,040 Total liabilities 20,637,338 20,792,521 Net Assets Board designated 1,500,000 1,500,000 Other net assets 6,744,302 7,351,100 Total net assets 8,244,302 8,851,100 * Certain amounts have been reclassified to conform with 2017 presentation. $ 28,881,640 $ 29,643,621 Attention is directed to independent auditor's report and notes to financial statements. 4

9 Statements of Activities (Unrestricted) For the Year Ended June 30, 2017 (With comparative totals for 2016) Revenues and Contributions Grants - Federal and local agencies $ 20,700,710 $ 21,502,534 - Charter schools 10,529,213 9,391,197 - United Way 136, ,950 Contributions - other 38,568 1,974 Interest and other income 180,062 67,121 31,584,553 31,125,776 Functional Expenses Program services 29,422,504 27,619,224 General and administrative 2,640,847 2,331,320 Fund raising 128, ,862 32,191,351 30,084,406 Change in net assets (606,798) 1,041,370 Net assets - beginning of year 8,851,100 7,809,730 Net assets - end of year $ 8,244,302 $ 8,851,100 Attention is directed to independent auditor's report and notes to financial statements. 5

10 Statements of Functional Expenses For the Year Ended June 30, 2017 (With comparative totals for 2016) P r o g r a m S e r v i c e s G e n e r a l a n d S u p p o r t C o m b i n e d T o t a l s Youth Refugee Workforce Schools Total Administrative Fund Raising Personnel costs Salaries $ 1,353,966 $ 5,292,963 $ 4,740,817 $ 4,875,959 $ 16,263,705 $ 1,468,548 $ 84,708 $ 17,816,961 $ 17,171,860 Payroll taxes and fringe benefits 509,997 1,988,403 1,484,561 1,559,732 5,542, ,661 26,335 6,040,689 5,872,809 Total personnel costs 1,863,963 7,281,366 6,225,378 6,435,691 21,806,398 1,940, ,043 23,857,650 23,044,669 Professional services ,531 59,559 53, , , , ,235 Seminars and training 2,125 3,444 5,569 5,569 6,703 Repairs and maintenance 11,540 54,090 65,630 5, ,084 69,432 Insurance 9,362 48,581 39, , ,664 21, , ,274 Rent 3, ,880 37, , ,796 2, ,885 1,038,660 Noncapital equipment/technology 11,805 17,425 1,625 40,652 71,507 4,771 76,278 Utilities 6, , , ,865 37, , ,083 Office expenses 17, ,813 80,335 65, ,772 39,524 1, , ,207 Travel and meal allowances 7,565 49,408 9, ,114 3,527 70,641 83,960 Program activities 27,356 33,319 60,675 60, ,147 School expenses 859, , , ,522 ** Economic assistance to participants 1,189,320 1,189,320 1,189,320 1,264,256 Tuition, books and other program expenses 514, ,049 1,286,259 2,107,262 2,107,262 1,297,078 Depreciation and amortization 12, , , , , ,173 Other expenses 30,118 81, , ,682 11,971 11, , ,007 Total expenses $ 2,463,556 $ 9,843,589 $ 7,783,914 $ 9,331,445 $ 29,422,504 $ 2,640,847 $ 128,000 $ 32,191,351 $ 30,084,406 ** Total economic assistance to participants $ 3,084,108 $ 3,084,108 $ 3,084,108 2,973,433 Less fair value of contributions to participants by family members where organization has no variance power. (1,894,788) (1,894,788) (1,894,788) (1,709,177) Net economic assistance to participants $ 1,189,320 $ 1,189,320 $ 1,189,320 $ 1,264,256 Attention is directed to independent auditor's report and notes to financial statements. 6

11 Statements of Cash Flows For the Year Ended June 30, 2017 (With comparative totals for 2016) * Cash flows from operating activities Cash received from grantors and revenues $ 30,436,015 $ 32,031,616 Cash paid to suppliers and employees (30,327,416) (29,553,519) Interest and other income received 180,062 67,121 Interest paid (904,314) (717,590) Net cash provided by (used in) operating activities (615,653) 1,827,628 Cash flows used in investing activities Construction and building cost (520,527) (179,399) Cash flows used in financing activities Principal payments (160,000) (152,981) Net increase (decrease) in cash (1,296,180) 1,495,248 Cash - beginning of year 3,061,906 1,566,658 Cash - end of year $ 1,765,726 $ 3,061,906 The net change in net assets may be reconciled to net cash provided by (used in) operating activities as follows: Net change in net assets $ (606,798) $ 1,041,370 Add back items which do not affect cash: Depreciation and amortization 776, ,173 Accrued interest 52,300 Interest capitalized (69,125) (229,775) Add or (deduct) changes in certain assets and liabilities: Accounts receivable (827,004) 841,704 Prepaid expenses 67,163 (26,740) Deposits 6, Other assets 56,375 (12,351) Accounts payable and accrued expenses 232, ,749 Accrued payroll (110,281) (354,338) Deferred revenue (141,472) 131,257 Net cash provided by (used in) operating activities $ (615,653) $ 1,827,628 * Certain amounts have been reclassified to conform with 2017 presentation. Attention is directed to independent auditor's report and notes to financial statements. 7

12 Statements of Cash Flows (Continued) For the Year Ended June 30, 2017 (With comparative totals for 2016) Noncash items: Proceeds from bond issuance used to pay off debt $ 10,383,899 Proceeds from bond issuance deposited in reserves 8,849,376 Proceeds from bond issuance used for real estate and closing cost 571,041 Purchases and construction cost paid from reserves 3,565,926 Underwriter's discount deducted from bond issuance 332,968 Attention is directed to independent auditor's report and notes to financial statements. 8

13 Notes to Financial Statements NOTE A Organization and Purpose Youth Co-Op, Inc. (YCI and/or the Organization) was incorporated as a not-for-profit organization under the laws of the State of Florida in YCI s mission is to improve the social and economic conditions of South Florida residents. YCI achieves this mission through a variety of programs that directly impact South Florida youth, adults, families, and recent immigrants, empowering them through education and employment, and identifying and strengthening their knowledge, skills, talents and abilities. Youth Programs Funded by federal and local grants, these programs serve children and youth ages 5 through 21. The participants are from diverse backgrounds reflective of the community. The Out-of-School program addresses the needs of youth who have dropped out of school, the In-School program helps dropout prevention, and the crime prevention programs teach positive decision-making skills to promising youth with risk factors. Refugee Programs Refugees are individuals and families who have fled their countries of origin and have met the United Nations criteria of having a well-founded fear of being persecuted for reasons of race, religion, nationality, membership in a particular social group of political opinion. The refugee services in South Florida, covering Palm Beach, Broward and Miami Dade Counties, offer an array of programs to assist refugees, asylums, and public interest parolees in achieving self-sufficiency to ease the transition in their new country. The agency has offered refugee employment services since In 1997, Youth Co-Op joined the network of the U.S. Committee for Refugees and Immigrants to provide Reception and Placement and Matching Grant Program services to refugees from varied countries. All services are free and available in the languages spoken by the participants. The Resettlement program assists refugees in translating their strengths, skills and past experiences into assets; the Match Grant program assists in achieving early self-sufficiency without accessing public assistance; Employment and Training programs provide assistance for employment as a key to successful integration into American society and immigration assistance is also provided in preparation for achieving citizenship. Workforce Programs Youth Co-Op operates seven Career Centers in partnership with the local region s workforce board. Centers are located in Miami Dade and Monroe Counties. A broad range of specialized services and resources are available and accessible to job seekers and employers throughout Youth Co-Op s centers. Services are funded by various federal grants that target specific populations and needs. These include unemployment and re-employment assistance to the general public, economically disadvantaged adults and dislocated workers, or families in need of temporary assistance. Training and support services are offered depending on the eligibility and on the specific goals set for each client. Charter School Group Youth Co-Op Charter School (YCCS) YCCS opened for the school year under a charter of the sponsoring school district, the Miami-Dade County Public School Board. The current charter, as renewed, is effective for fifteen years expiring in June YCCS is a Title I public school-of-choice which teaches children in grades K-8 using state-of-the-art teaching methods and small class sizes. 9

14 Notes to Financial Statements NOTE A Organization and Purpose (continued) Charter School Group (continued) YCCS has been recognized by the governor, won numerous awards, and earned an A rating since its inception. Youth Co-Op Preparatory High School (YCPHS) YCPHS was granted a charter for the school year from the sponsoring school district, the Miami-Dade County Public School Board, expiring June 2023 (as amended). YCPHS deferred the start date one year to the YCPHS is also a Title I public school-of-choice which teaches ninth through twelfth grade. The contracts may be renewed for a term of five (5) years by mutual written agreement between the Schools and the School Board. At the end of the term of the charter, the School Board is required to notify the Schools in writing at least 90 days prior to the charter's termination. Pursuant to Section (8) (e) of the Florida Statute, the contract provides that in the event the Schools are dissolved or terminated, any unencumbered funds and all school property purchased with public funds automatically revert to the School Board. During the course of the charter, the School Board may also terminate the charter if good cause is shown. Youth Co-Op Charter Management Division (CMD) YCI s Board is committed to grow in the education sector, by replicating the high success achieved in the last fifteen years. In this connection, YCI created an educational division to operate the network of schools. Currently, the CMD oversees the design and construction of the new school location and makes necessary changes to the academic, technological, fiscal and physical infrastructures to provide an exemplary learning environment for students. For the year ended June 30, 2017, an average of 1,107 students were enrolled in grades kindergarten through eighth at YCCS and an average of 235 students were enrolled in grades ninth through twelfth at YCPHS. NOTE B - Summary of Significant Accounting Policies The most significant accounting policies described below have been identified as those which impact the reader s understanding of the Organization s basis of financial statement presentation the most, and those that require significant estimates and judgment on the part of management. The Organization also has other important policies which are detailed in the following pages that also require the use of estimates and judgments. Most Significant Accounting Policies Basis of Financial Statements Presentation and Significant Estimates Fair Value Measurements 10

15 NOTE B Summary of Significant Accounting Policies (Continued) 1. Basis of Financial Statements Presentation and Significant Estimates Reporting Requirements Youth Co-Op, Inc. Notes to Financial Statements The accompanying financial statements include the accounts of YCI and those of the charter schools programs and have been prepared in accordance with generally accepted accounting principles and reporting practices for this industry. The accounts of YCI are maintained on the accrual basis of accounting and in accordance with the principles of fund accounting, in order to ensure observance of the limitations and restrictions placed on the use of its resources. Such funds are grouped into the following categories: Unrestricted Temporarily Restricted Permanently Restricted Unrestricted group reflects the Organization s unrestricted activities that are not subject to donor-imposed stipulations. Temporarily restricted group reflects the Organization s activities and resulting net assets from donors restricted contributions that the Organization feels will be met, either by the passage of time or by actions of the Organization. The Organization has no temporary restricted assets. Permanently restricted group reflects the Organization s activities and resulting net assets from contributions and other inflows of assets whose use by the Organization is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organizations. The Organization has no permanently restricted net assets. In this connection, all donor-restricted support will be reported as an increase in temporarily restricted or permanently restricted net assets depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets will be classified to unrestricted net assets. Therefore, support that is restricted by the donor will be reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. Comparative Financial Statements The financial statements include certain prior-year summarized comparative information in total, but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended June 30, 2016, from which the summarized information was derived. Estimates In preparing the financial statements of the Organization, management had to make estimates and assumptions that affected the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the balance sheet date, and the revenues and expenses for the period then ended. Such estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. However, actual results could differ from those estimates and these differences may be material. 11

16 NOTE B Summary of Significant Accounting Policies (Continued) 2. Fair Value Measurements Youth Co-Op, Inc. Notes to Financial Statements Fair value measurements establish a hierarchy to prioritize the computation of fair value. Such hierarchy consist of a) - valuations based on quoted prices in active markets for identical assets or liabilities (Level 1), b) - valuations based on observable quoted prices for similar assets and liabilities in active markets (Level 2), and c) - valuations based on inputs that are unobservable and are supported by little or no market activity, therefore, requiring management s best estimate of what market participants would use as fair value (Level 3). A description of the YCI s accounting principles and basis of presentation with regards to the fair market value of its assets and liabilities follows: Financial assets and liabilities The Organization reflects certain financial assets and liabilities such as accounts receivable, prepaid expenses, reserves, accounts payable, accrued expenses, deferred revenue, and debt obligations at their carrying values in accordance with generally accepted accounting principles in the United States. Non-financial assets and liabilities YCI s non-financial assets and liabilities comprise of assets which are measured at fair value on a nonrecurring basis, property and equipment being the most significant non-financial asset of the Organization. As further explained in Note B(5), property and equipment is tested for impairment and adjusted to fair market value based on a Level 2 or 3 type of valuation when circumstances indicate that the carrying value of an asset may not be recoverable. Other Significant Accounting Policies 3. Cash and Cash Equivalents The Organization considers investments in highly liquid debt instruments with maturity of three months or less to be cash equivalents. There were no such cash equivalents as June 30, Accounts Receivable - Grants and Other YCI considers accounts receivable to be collectible; accordingly, no allowance for doubtful accounts is required. When amounts are determined to be uncollectible, they are charged to operations. There are no uncollectible accounts during the years ended June 30, 2017 and Property and Equipment Property and equipment is recorded at cost when purchased or constructed, or at market value when donated. The Organization capitalizes all expenditures in excess of $1,000 for property and equipment at cost. Donations are reported as unrestricted support unless the donor has restricted the donated asset for a specific purpose. Property and equipment acquired with certain federal funds may have to be returned to the funding agency upon termination of the program. The funds received for the purchase of such property is recorded as temporarily restricted. The annual depreciation charge on those assets is reflected as net assets released from restriction. Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. 12

17 NOTE B Summary of Significant Accounting Policies (Continued) Other Significant Accounting Policies (Continued) 5. Property and Equipment (continued) Youth Co-Op, Inc. Notes to Financial Statements Depreciation is included in the statement of activities and is computed on the straight-line basis over the estimated useful life of the assets. Long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset may not be recoverable. If the carrying value is impaired, the long lived assets will be written down to their fair market value with a corresponding charge to earnings. No such impairment was recorded for the years ended June 30, 2017 and Deferred Revenue The Organization recognizes revenue on certain government contracts, which in substance are the same as commercial transactions, when such revenues are earned. The unearned portion is reflected as deferred revenue. 7. Donated Materials and Services Donated materials and services are reflected in the accompanying statements provided that they create or enhance non-financial assets or require specialized skills and would typically be purchased if not provided by donation as required for recognition under generally accepted accounting principles. 8. Income Taxes YCI is organized as a not-for-profit entity and is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Unrelated business income, of which the Organization had none for the year ended June 30, 2017, would be subject to federal income taxes. Accordingly, no provision for income taxes is required. The Organization s information returns filed with the Internal Revenue Service have not been examined in the past. The Organization is not aware of any uncertainties that could jeopardize its Not-For-Profit status. Therefore, no provision or liability for income tax is deemed necessary. The Organization follows the provisions of uncertain tax provisions addressed by FAS ASC Accounting For Uncertainty in Income Taxes. The Organization has no uncertain tax positions at June 30, 2017, for which the ultimate deductibility is highly certain but for which there are uncertainty about the timing of such deductibility. The Organization recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expense. The Organization has determined that no amount required to be accrued for taxes or related penalties and interest for any tax position taken through June 30,

18 NOTE B Summary of Significant Accounting Policies (Continued) Other Significant Accounting Policies (Continued) 9. Recent Accounting Pronouncement Youth Co-Op, Inc. Notes to Financial Statements In 2016, the Organization adopted a recent accounting pronouncement issued by the Financial Accounting Standards Board ( FASB ), Interest Imputation of Interest: Simplifying the Presentation of Debt Issuance Cost in ASU No The new guidance requires presenting cost of issuance of debt as a direct deduction from the face amount of the debt (See Note D). Amortization is required to be included in interest expense in the income statement. The update is effective for fiscal year beginning after December 16, A reporting entity should apply the update retrospectively to all periods presented. Early adoption is permitted. 10. Subsequent Events Subsequent events have been evaluated through December 21, 2017, which is the date the financial statements were available to be issued. NOTE C Property and Equipment Property and equipment consist of the following: Useful June 30, Life (Years) Land $ 6,948,398 $ 6,948,398 Building and construction cost (1) 13,171,589 10,443, Leasehold improvements 31,500 5 Property and equipment 1,200, ,286 5 Furniture and fixtures 400, ,087 7 Educational material 130, ,882,884 18,633,932 Less accumulated depreciation 2,001,165 1,477,770 $ 19,881,719 $ 17,156,162 (1) As further explained in Note D, the Organization constructed a new building for its Charter Schools. Construction was completed and the asset put into use during fiscal year ended June 30, Interest and other construction cost incurred during the construction period (acquisition period) relating to the building under construction was capitalized with the building and construction cost. Interest capitalized during the fiscal years ended June 30, 2017 and 2016 totaled approximately $69,000 and $229,000, respectively. 14

19 Notes to Financial Statements NOTE C Property and Equipment (Continued) Depreciation expense for the fiscal years ended June 30, 2017 and 2016 amounted to $523,394 and $271,920, respectively. Certain equipment was acquired with grant funds received from the grantors. Under terms of the grant agreement, the equipment reverts back to the grantor upon disposal. NOTE D Long-Term Debt The debt reflected in the accompanying financial statements consist of the following: June 30, Miami-Dade Country Industrial Development Authority Bonds: Series 2015A (1) $ 19,725,000 $ 19,725,000 Series 2015B (2) 170, ,000 19,895,000 20,055,000 Less unamortized debt issuance costs (3) (524,417) (528,960) 19,370,583 19,526,040 Less current portion (170,000) (160,000) $ 19,200,583 $ 19,366, Bond Issuance Project The Board of Directors agreed to fund a project, by procuring a loan, to construct additional building facilities to be used by the charter schools in order to increase student enrollment. In addition, the proceeds from such loan would be utilized to extinguish a previous mortgage, a subordinated promissory note, and any issuance costs. The loan procured on August 18, 2015 from the Miami-Dade County Industrial Development Authority includes the issuance of $19.7 million in 6.5% tax exempts bonds (Series 2015A) and $330,000 in 6% taxable bonds (Series 2015B) under the terms of the Series 2015 Loan Agreement (the Loan Agreement). 15

20 Notes to Financial Statements NOTE D Long-Term Debt (Continued) 2015 Bond Issuance Project (continued) Proceeds of the bonds offering were used as follows: Pay off BB&T Loan $ 8,782,000 Pay off Building Loan 1,602,000 New construction 6,795,000 Real estate cost 57,000 17,236,000 Capitalized interest fund 629,000 Debt service reserve fund 1,425,000 2,054,000 Cost of issuance/underwriter's discount 683,000 $ 19,973,000 In addition, in accordance with the Loan Agreement, the Issuer established special trust funds held by a trustee as follows: Revenue Fund Monthly payments made by the Organization are deposited into the Revenue Fund held by the Trustee. Disbursements by the Trustee from the Revenue Fund are made to the Bond Fund on each scheduled monthly payment date for principal and interest due on the bonds on the next principal payment date and interest payment date, respectively, plus any amount previously due but unpaid. Bond Fund The Bond Fund maintains amounts to pay capitalized interest and disbursements from the Revenue Fund. Funds in the Bond Fund are used solely for the payment of the principal and premium, if any, on each principal payment date and interest on the bonds on each interest payment date. At June 30, 2017, this account had a zero balance. Capitalized Interest Account The Capitalized Interest Account maintains an amount deposited with the Trustee upon issuance of the Series 2015A Bonds. Funds in the Capitalized Interest Account are used to pay capitalized interest on the Series 2015A Bonds through At June 30, 2017, this account had a zero balance. Debt Service Reserve Fund The Debt Service Reserve Fund maintains an amount deposited with the Trustee upon issuance of the Series 2015A Bonds. The fund must maintain an amount not less than the Debt Service Reserve Fund Requirements. Funds in the Debt Service Reserve Fund may be used for the payment of the principal of and premium, if any, and interest on the Series 2015A Bonds in the event funds in the Bond Fund are insufficient to make such payments when due, and upon the occurrence of an event of default. 16

21 Notes to Financial Statements NOTE D Long-Term Debt (Continued) Project Fund The Project Fund maintains the proceeds used for construction and renovation from the issuance of the Series 2015A Bonds deposited with the Trustee. Disbursements by the Trustee from the Project Fund are made to pay costs of the project upon receipt of an invoice by the Trustee. Reserves at June 30, 2017 consist of the following: Revenue fund $ 516,772 Debt service reserve fund 1,466,143 Project fund $ 430,464 2,413,379 (1) The Series 2015A was issued to: (i) refinance existing indebtedness which financed the charter school's facilities, (ii) finance the construction of new classrooms, a cafeteria expansion, expansion and remodeling of existing buildings and certain other capital improvements (iii) fund a debt service reserve fund for the Series 2015A Bonds and (iv) pay capitalized interest and bond issuance costs on the Series 2015A. The Series 2015A Bonds bears interest and matures as follows: Maturity Date (September 15) Principal Amount Interest rate 2025 $ 2,775, % ,605, % ,345, % $ 19,725,000 17

22 Notes to Financial Statements NOTE D Long-Term Debt (Continued) The Series 2015A Bonds are subject to mandatory sinking fund redemption as follows: $2,775,000 Term Bond maturing on September 15, 2025: Principal Payment Date Principal Amount (September 15) to be Redeemed 2018 $ 290, , , , , , , $ 410,000 2,775,000 $5,605,000 Term Bond maturing on September 15, 2035: Principal Payment Date Principal Amount (September 15) to be Redeemed 2026 $ 430, , , , , , , , , $ 710,000 5,605,000 18

23 Notes to Financial Statements NOTE D Long-Term Debt (Continued) $11,345,000 Term Bond maturing on September 15, 2045: Principal Payment Date Principal Amount (September 15) to be Redeemed 2036 $ 755, , , , , ,005, ,070, ,130, ,200, $ 2,695,000 11,345,000 (2) The Series 2015B was issued to pay issuance costs related to the Series 2015 A. The Series 2015B Bonds are subject to mandatory sinking fund redemption as follows: Principal Payment Date Principal Amount (September 15) to be Redeemed 2017 $ 170,000 (3) Previously, the Organization reflected unamortized debt issuance costs as deferred charges on the statement of financial position, and has retroactively reclassified the 2016 amounts to accord with the new debt deduction presentation. The reclassification reduced total assets and debt at June 30, 2016 by $528,960 with no effect on beginning net assets. Amortization expense for the fiscal year ended June 30, 2017 amounted to $252,736. The Loan Agreement contains various covenants, which among other things, place restrictions on the Organization s ability to incur additional indebtedness and require the Organization to maintain certain financial ratios. The Organization is in compliance with such covenants at June 30,

24 Notes to Financial Statements NOTE E Interest Costs The Organization capitalizes interest cost as a component of the cost of construction in progress. The following is a summary of interest cost incurred: For the Year Ended June 30, Interest cost capitalized $ 69,125 $ 229,775 Interest cost expensed 1,087, ,115 Total interest cost incurred $ 1,157,050 $ 769,890 NOTE F Commitments and Contingencies Commitments The Organization is obligated under various leases for office equipment and facilities, which expire at various dates through The Organization s lease expense consists of the following: For the Year Ended June 30, Space $ 749, ,759 Equipment 79, ,071 $ 828,787 $ 952,830 The minimum rental commitments for such leases approximate the following: Contingencies For the Years Ending June 30, 2018 $ 373, ,000 $ 515,000 The Organization is subject to federal and local government audits. These audits could result in the questioning of expenditures relating to certain grants under various technical compliance provisions of the individual grants. In management s opinion, there will be no adjustments resulting from future audits on grant periods through June 30, 2017, which will have a material effect on the financial statements. 20

25 NOTE F Commitments and Contingencies (Continued) Credit Risk Youth Co-Op, Inc. Notes to Financial Statements The Organization s cash balances during the year were in excess of the federal insured limits of $250,000. At June 30, 2017, the Organizations uninsured cash balances approximated $1,626,000. However, the Organization maintains its cash with high quality financial institutions which the Organization believes limits these risks. Cash funds of the Charter Schools are qualified as a Public Deposit as defined in Chapter 280 of the Florida Statutes and therefore are fully insured. NOTE G Employee Benefit and Profit-Sharing Plans The Organization s profit-sharing plan provides retirement, disability, and death benefits for qualified employees. The Organization s contributions to the plan are determined by the Organization s Board of Directors and such contributions to the profit sharing plan for the years ended June 30, 2017 and 2016 amounted to approximately $900,000. In addition, the Organization adopted a non-qualified plan (the Supplemental Retirement Plan and/or the Plan) to provide additional retirement and death benefits to those employees that initiated their employment with the Organization before January 1, 1989 (past service benefits). The Organization did not open a separate trust account for the Supplemental Retirement Plan and therefore, the investment representing the funds set aside for the Supplemental Retirement Plan less the related liability is carried in its statement of position. The investments are managed and held by the custodian, AXA Equitable Life Insurance Company ( AXA ), who invests the contributions and actual earnings as directed by the participant. Such investments are comprised of marketable securities, which are carried at fair value. Any unrealized gain or loss on marketable securities is applied against the amounts due to the participants under the Plan. The Supplemental Retirement Plan s investments are reported at fair value in the accompanying statement of financial position. Individual Accounts are stated at market value less operating expenses accrued but not deducted, if any. If an Individual Account invests in an underlying mutual fund the value of such Individual Account is the number of the shares invested in the mutual fund multiplied by the mutual fund s net asset value (NAV) for the valuation date. If there is no readily available market, its value is the fair market value of the assets held in such Individual Account as determined by AXA using generally accepted accounting practices and applicable law. The value of this type of investment is calculated daily by the fund administrator. The fair value of such assets as of June 30, 2017 and 2016 totaled $237,992 and $218,556, respectively (level 2) (see Note B(2)). The employees have the option to convert the Individual Accounts into a Guaranteed Minimum Income Benefit which will provide 5% compound interest accumulated as the Benefit Base on an Annual Basis, and will be available as a minimum lifetime income stream at retirement. Each account also has a life insurance policy on the life of the participants to cover the past service liability in case the participant dies before age 65 and while still employed by the Organization. The Organization s cost of the life insurance policy approximated $2,900 for each year ended June 30, 2017 and

26 Notes to Financial Statements NOTE H Business and Credit Concentration The Organization s services are substantially funded by federal and local grants. For the years ended June 30, 2017 and 2016, the Organization s revenues derived from federal grants aggregated to approximately 66% and 65% of total revenues and contributions, respectively. Governmental grants may be significantly impacted by budget allocations and consequently an adverse change in any of these factors could affect the Organization s operations and collectability of related receivables. NOTE I Matching Funds Requirement The Organization receives most of its funds from two types of contracts (performance and line item reimbursement contracts). Some contracts require that a portion of the total program cost be contributed by other sources as defined by the contract and/or regulations (matching funds). For the year ended June 30, 2017, the Organization s contract with one of funding agencies required that a portion of the total program cost be contributed by other sources as defined by the contract. YCI is required to provide certain matching funds under the terms of the contract. The Organization is in compliance with these requirements. 22

27 SUPPLEMENTAL INFORMATION

28 Schedule I Schedule of Expenditures of Federal Awards For The Year Ended June 30, 2017 Federal Grantor/ Pass-Through Entity/ CFDA Grant Federal Federal Program Number Number Expenditures U.S. Department of Agriculture Passed through South Florida Workforce Supplemental Nutrition Assistance Program / WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC- PY' /WS-CC-PY' $ 318,204 Passed through Florida Department of Agriculture National Lunch Program ,770 Total U.S. Department of Agriculture 899,974 U.S. Department of Labor Passed through South Florida Workforce Unemployment Insurance * WIA/WIOA Adult Program / WIA/WIOA Youth Activities / WIA/WIOA Dislocated Worker Formula Grants / / WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC- PY' /WS-CC-PY' ,553 WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC- PY' /WS-CC-PY' /WS-YS-ISY-PY' /WS-YS-ISY-PY' /WS-YS-OSY-PY' /WS-YS-OSY-PY' ,174,924 Total U.S. Department of Labor 5,463,477 U.S. Department of State Passed through U.S. Committee for Refugees and Immigrants Reception and Placement Program SPRMCO1CA1004 / SPRMCO16CA ,649 U.S. Department of Health and Human Services (HHS): Passed through South Florida Workforce Temporary Assistance to Needy Families (TANF) WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC-PY' /WS-CC- PY' /WS-CC-PY' ,946,279 Refugee and Entrant Assistance - Targeted Assistance Grants RET-DP-OSY-PY' / RET-DP-OSY-PY' ,398,763 5,345,042 Passed through Department of Children and Families Refugee and Entrant Assistance - Targeted Assistance Grants * LK182 / LK ,216 Refugee and Entrant Assistance * XK035 / XK036 / XK037 2,945,642 3,465,858 Passed through U.S. Committee for Refugees and Immigrants Refugee and Entrant Assistance - Voluntary Agency Programs RV00067 / 90ZU0081 / 90ZU ,782,126 Total U.S. Department of Health and Human Services 11,593,026 * Denotes major program Total Federal Awards $ 18,194,126 Attention is directed to independent auditor's report and note to the Schedule of Expenditures of Federal Awards. 23

29 Note to Schedule of Expenditures of Federal Awards NOTE A - Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards includes the federal award activity of Youth Co-Op, Inc. under programs for the federal government for the year ended June 30, The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Youth Co-Op, Inc., it is not intended to and does not present the financial position, changes in net assets, or cash flows of Youth Co-Op, Inc. NOTE B Summary of Significant Accounting Policies (1) Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. (2) Youth Co-Op, Inc. has elected not to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. 24

30 REPORTING SECTION

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35 (A Not-Profit Organization) Schedule of Findings and Questioned Costs Summary of Auditors Results 1. The auditor s report expresses an unmodified opinion on the financial statements of Youth Co- Op, Inc. (YCI). 2. There were no deficiencies disclosed as a result of the audit of the financial statements. 3. No instances of noncompliance material to the financial statements of YCI were disclosed as result of the audit. 4. No significant deficiencies were disclosed as result of the audit of the major federal award program. 5. The auditors report on compliance with the major federal award program for YCI expresses an unmodified opinion. 6. No findings were disclosed as result of the audit relative to the major federal award program. 7. The programs tested as a major program included: CFDA Number(s) Unemployment Insurance (UI) Refugee and Entrant Assistance State/Replacement Designee Administered Programs 8. For the June 30, 2017, Single Audit, the threshold used to distinguish between Type A and Type B programs was $750,000 for major federal programs. 9. YCI was determined to be a low-risk audit. Findings Financial Statements Audit None Findings and Questioned Costs Major Federal Award Program None Findings and Questioned Costs for prior year None 29